JPMorgan, Paloma, Hedge Fund, Outsourcing

[SharedXpertise Commentary] JPMorgan Worldwide Securities Services to acquire Paloma's middle and back office operations

15 Feb 2006 | (News) | SharedXpertise Editor Commentary

For SharedXpertise commentary, please see below

JPMorgan Worldwide Securities Services (WSS) is to acquire the middle and back office operations of Paloma Partners Management Company as part of a strategic program to build a complete suite of outsourced services for hedge fund operations and administration.

"Paloma's experienced personnel and innovative technical platform are very attractive to JPMorgan. This acquisition allows us to immediately offer our hedge fund clients a high quality option - built on top of a hedge fund-specific platform - for outsourcing their daily operations," said Liz Nolan, Global Head of Alternative Investment Services for JPMorgan WSS.

In addition, the parties have agreed to enter into a multi-year contract for JPMorgan to provide daily operational services to Paloma. "JPMorgan's experience in supporting the hedge fund segment and quality approach to service ensure that Paloma will have the best-in-class operations and infrastructure to support our investment portfolio," said S. Donald Sussman, founder of Paloma and owner of the company that manages the Paloma funds. "Outsourcing these functions to JPMorgan at this time allows us to bring even greater focus to the investment side of our business." 

"An increasing number of our hedge fund customers are interested in finding a trusted third party to run their operations for them" said Bhagesh Malde, Global Business Head for Hedge Fund Services. "Not only can this service lower the cost of operations for hedge funds, but it frees managers from operational issues so they can focus on what they do best - making trading decisions."

"Because the hedge fund business is relatively new, few providers have the right combination of experience and service quality," said Malde. "The combination of Paloma's technology and operations platform and JPMorgan's existing franchise brings together the experience in back office servicing, proven processes and technology, and global resources needed to manage all the requirements of these complex outsourcing relationships."

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SharedXpertise Commentary:

For years now, JPMorgan has been providing outsourced services. According to a JPMorgan spokesperson, they began offering hedge fund services in June 2004 with the acquisition of Tranaut Fund Administration.

The acquisition route is helping JPMorgan to quickly take advantage of the growing market for outsourced financial services, enhancing its position as an outsourcing provider.

Another interesting note in this sector is the rise in middle office outsourcing, often done in-house due to its complexity. According to TowerGroup estimates, service providers earned $71 million USD from hedge fund middle-office servicing in 2005 and that earnings will increase significantly to $268 million by 2008.

Author: Commentary, SharedXpertise Editor
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